Top News Stories from July
Islamic Republic of Iran Broadcasting (IRIB) claims that the local government has seized more than 1,000 bitcoin mining devices from two separate mining farms in the country. According to local officials, this was owing to Iran’s government subsidized electricity seeing a 7% spike in consumption for the month of June, destabilizing the country’s power grid, with Bitcoin mining operations taking place in locations where the state provided entirely free electricity, such as schools and places of worship. Interest in Bitcoin among Iranians escalated on a large scale following US sanctions restricting the nation’s access to the world economy.
US House Democrats request Facebook to halt development of its proposed cryptocurrency project Libra until Congress and regulators have had time to investigate potential “systemic risks” it poses to the global financial system. In a letter addressed to Facebook’s C-suite, lawmakers requested an immediate moratorium on the implementation of Facebook’s proposed cryptocurrency and digital wallet, “It is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action. During this moratorium, we intend to hold public hearings on the risks and benefits of cryptocurrency-based activities and explore legislative solutions.”
Keynesian Economist and noted crypto bear, Nouriel Roubini has a debate with Arthur Hayes, CEO of BitMEX, at the Asia Blockchain Summit in Taipei, dubbed the “Tangle in Taipei.” Roubini and Hayes disagreed over is whether cryptocurrency exchanges should be regulated, with Roubini branding BitMEX “an example of everything that is sick and rotten in this particular industry.”
Cuba deliberates using cryptocurrency to skirt U.S. sanctions. Cuba’s Communist government said it was studying the potential use of cryptocurrency as part of a series of measures to boost its economy amid a deepening crisis exacerbated by U.S. sanctions. “We are studying the potential use of cryptocurrency … in our national and international commercial transactions, and we are working on that together with academics,” Economy Minister Alejandro Gil Fernandez said.
European Central Bank Executive Board member Benoit Coeure urges regulators around the world to act fast in preparing for the push by US tech giants such as Facebook Inc. into the financial system, “It’s out of the question to allow them to develop in a regulatory void for their financial service activities, because it’s just too dangerous. We have to move more quickly than we’ve been able to do up until now.” Coeure further added that the development of digital currencies is exposing deficiencies in existing regulation and the failure of the banking system to adopt the new technology themselves.
India introduces cryptocurrency training to high-ranking police officers to combat scams and help with investigations involving digital currencies. The country’s national police academy, Sardar Vallabhbhai Patel National Police Academy (SVP NPA), launched an educational course, set to commence in September, to help officers learn about the “legal aspects of cryptocurrencies, crimes committed using cryptocurrencies, [and], investigation of cases involving cryptocurrencies.”
US President Donald Trump, via comments typically made on Twitter, launches into an broadside against Bitcoin and cryptocurrencies, denouncing their veracity as money, questioning their fundamentals and highlighting their role in enabling unlawful activities, “I am not a fan of bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated crypto-assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
Binance unveils margin trading services for “evolving cryptocurrency traders”, supporting up to 3x margin trading for six cryptocurrencies – Bitcoin (BTC), ether (ETH), XRP, Binance coin (BNB), Tron (TRX), and Tether (USDT). The service will be offered under the revamped platform “Binance 2.0”, which will allow users to move funds easily from their margin Wallet to their primary Binance wallet at zero transaction fees. “This is another step in providing an inclusive cryptocurrency trading platform catering to the needs of both advanced institutional traders and retail traders under the same roof,” said Binance CEO Changpeng Zhao.
Following in the footsteps of the UFC, American professional football team, Miami Dolphins announce that Litecoin (LTC) will be the team’s official cryptocurrency. Cryptocurrency users will reportedly be able to buy raffle tickets with LTC and Bitcoin (BTC), and can do so online or via in-stadium kiosks at Hard Rock Stadium. Litecoin will appear in Dolphins’ in-game branding and an array of advertisement opportunities.
Japan’s Bitpoint cryptocurrency exchange gets hacked. The exchange released a statement saying that around 3.5 billion yen ($32 million) of funds were stolen, with 2.5 billion yen of that belonging to customers. The hot wallet involved in the hack contained five cryptocurrencies, including Bitcoin and Ripple. Bitpoint responded by suspending all services, including withdrawal, trading, and deposit. The company said it hadn’t detected any irregular activity or missing funds affecting cold wallets.
On the first day of Libra hearing, Calibra CEO David Marcus testifies in front of the Senate Banking Committee. The committee focused on one simple question – Can Facebook be trusted to run its own currency? Senator Sherrod Brown from Ohio scoffed at the idea given Facebook’s squalid track record, “Like a toddler who has gotten his hands on a book of matches, Facebook has burned down the house over and over, and called every arson a learning experience. We would be crazy to give them a chance to experiment with people’s bank accounts.”
Day two of Libra hearing in front of the House Financial Services Committee features broader discussion on cryptocurrencies in general. Antitrust, Facebook’s $5 billion FTC fine, Facebook’s censorship policies, composition of the Libra association, the nature and role of Libra and legitimacy of its claim to being a cryptocurrency like Bitcoin were discussed. During the hearing, Marcus assured the representatives in Congress that Facebook would not launch Libra before it has addressed all of their regulatory concerns.
US Commodity Futures Trading Commission (CFTC) opens investigation into cryptocurrency derivatives exchange platform, BitMEX. The probe is focused on whether BitMEX broke rules by allowing Americans to trade on the platform without being registered with the agency for servicing American customers as CFTC considers virtual currencies like Bitcoin to be commodities, and it has jurisdiction over futures and other derivatives based on them.
Swiss Federal Data Protection and Information Commissioner (FDPIC) denies being contacted by Facebook regarding its cryptocurrency project after Libra CEO mentioned in his testimony that the FDPIC would be the Libra Association’s privacy regulator. Head of communication at the FDPIC refuted the claim saying, “We have taken note of the statements made by David Marcus, chief of Calibra, on our potential role as data protection supervisory authority in the Libra context. Until today we have not been contacted by the promoters of Libra.”
Bitcoin futures platform Bakkt begins testing phase for its futures contracts. While still awaiting regulatory approval to take the platform live, Bakkt tweeted that it began testing as planned, “Testing is proceeding as planned with participants from around the world.” Bakkt will be testing two different types of contracts – a daily and a monthly contract, with user acceptance testing including both contracts.
TRON Foundation announces postponement of Warren Buffett lunch and press conferences after founder Justin Sun falls ill with kidney stones. Sun, known for his outlandish marketing schticks, apologized on Chinese microblogging website Weibo for “over-marketing” and his immature words and behaviour. The postponement caused many to speculate whether Sun was in trouble with Chinese authorities. According to Chinese media reports, Sun’s companies were being investigated for illegal fundraising and money laundering.
A Survey of 1800 American adults carried out by consumer intelligence research platform CivicScience reveals that 40% of Americans trust Libra slightly less than Bitcoin and other cryptocurrencies and 35% trust Libra much less than Bitcoin. 86% of Americans responded that they are not interested in Facebook’s Libra, while 77% of Americans said they do not trust Facebook with their personal data.
In its second quarter earnings report to the SEC, Facebook warns investors that Libra may never launch, citing “significant scrutiny from governments and regulators in multiple jurisdictions which is expected to continue.” The company conceded that the barriers due to uncertain regulatory framework may impede the project, “There can be no assurance that Libra or our associated products and services will be made available in a timely manner, or at all.”
US lawmakers convene to discuss cryptocurrency and blockchain policies in a hearing featuring Banking, Housing and Urban Affairs committees, where lawmakers were almost unanimous in their agreement that “digital technology innovations are inevitable and the US should lead in developing these innovations and what the rules of the road should be.” Senator Mike Crapo from Idaho stressed that banning cryptocurrencies would be impossible, “If the United States were to decide — and I’m not saying that it should — if the United States were to decide we didn’t want cryptocurrency to happen in the United States and tried to ban it, I’m pretty confident we couldn’t succeed.”
Libra’s unwitting leg-up to Bitcoin
On the face of it, if we’re simply talking price action, July has been slightly bearish. There’s no two ways about it. But there’s more to Bitcoin than it just being a speculative trading asset and more people are coming around to the idea, thanks to Facebook. Wait! Thanks to Facebook?
Throughout its decade-long existence, Bitcoin has been a highly contentious subject in mainstream media, among bankers and lawmakers. However, beyond the occasional sound bite, lawmakers were never moved to firmly act and implement unequivocal regulation against Bitcoin and digital assets at large. All of that changed in July, thanks… to Facebook.
No sooner had Facebook published their white paper for Libra, than financial regulators around the world lined up to shoot down the idea because here was a tangible threat to the system with a readily recognizable face, pun intended, and source.
Facebook’s foray into cryptocurrency also got regulators talking about digital assets in the broader context and Bitcoin very specifically, whereupon a realization, tinged with resignation, dawned upon them that, unlike Libra, a fight against the “unstoppable force” of Bitcoin is one they could never win.
When it’s all said and done, though ill-conceived and probably ill-meaning Facebook’s cryptocurrency plans may have been, bitcoiners will have good reason to be thankful for Facebook’s villainous venture to hop on the blockchain bandwagon to usurp the financial system.
Facebook’s efforts to market Libra as a necessary, inevitable “innovation” which is imperative for the US to retain regulatory purview over, is a rather vulpine ruse to strong-arm regulatory approval. Whether the ploy bears fruit or whether lawmakers recognize that Libra is a wolf in sheep’s clothing remains to be seen.
Scofflaw BitMEX is not safe and snug in Seychelles
For five years, BitMEX founder Arthur Hayes has frequently touted the line that BitMEX was not subject to US laws as it was registered in the safe haven of Seychelles, an archipelago in the Indian Ocean off the east coast of Africa with fewer citizens than there are registered traders on BitMEX.
A little background on Hayes is in order here. An economics graduate from Wharton in Pennsylvania, Hayes was a banker prior to his involvement in Bitcoin. Specifically, he was an equities trader for Deutsche Bank & Citigroup Inc. in Hong Kong, which is where he lives. Following the financial crisis, Hayes was on the brink of losing his job in a periodic cull at Citibank, which is when he discovered Bitcoin.
In 2013, Hayes got into trading Bitcoin, seeking arbitrage opportunities between spot and derivatives and different spot exchange markets. He then began brokering at a time when cryptocurrencies were still a very nascent class of assets before collaborating with two other partners, Ben Delo and Samuel Reed, to establish Bitcoin derivatives platform BitMEX, Bitcoin Mercantile Exchange in 2014. Delo and Reed are both computer science graduates.
It seems like a great team and it has proved to be as much for the past five years, until BitMEX started seeking more attention and Bitcoin started to go a little mainstream. Following an ugly spat with economist Nouriel Roubini in Taipei, after which Roubini called out BitMEX as a scam, Hayes is probably wishing that, besides computer geeks, he also had a legal expert among his ranks.
BitMEX’s parent company, HDR Global Trading Limited is registered in Seychelles and could be immune from US regulation but if BitMEX is found by US Commodity Futures Trading Commission (CFTC) to be allowing US traders to trade on its platform without registering with the commission, it is well within the powers of the US government to shut down the website.
That is because all dot-com (.com) domains fall under US jurisdiction. In 2012, US asserted an unqualified “super jurisdiction” over dot-com, dot-net, and dot-org domains, whereby all dot-com, dot-net, and dot-org domain names became subject to US jurisdiction regardless of where they operate or where they were registered.
After all, in the words of Hayes himself, BitMEX is just a website, “I don’t want to force anyone to use BitMEX. We just have a website and don’t do any marketing. Somehow a few thousand people have found a little oasis and started trading with us.”
Coming into July, Bitcoin had been on a parabolic rise not dissimilar to the late 2017 surge. In any market, the longer such a curve lasts and the steeper it gets, the more perilous the eventual fall.
Strange as it may sound, the fact that Bitcoin steadied and consolidated its position around the five-figure mark is even more bullish than if it had surged further ahead. Now Bitcoin has established a new support level, a new normal to build from.
Although Bitcoin closed July just above 10000, it closed the month in red for the first time in six months. The last time this occurred, Bitcoin rose over 450% in just three months. The three-day chart also witnessed a golden cross this week, as the 50-period simple moving average crossed above the 200-period moving average.
Daily RSI is ever so slightly showing a bullish divergence and %K is exhibiting a steep bullish divergence. A third positive indicator comes in the shape of bullish crossover of +DI. 10738 is the next resistance level for Bitcoin to overcome.
From a slightly cautionary short-term perspective, should the support near 9300 at .38 Fibonacci level be breached, Bitcoin could yet dip to 8300 and 7200 levels which would represent .5 and .61 Fibonacci retracements and also coincide with unfilled CME futures gaps from May and June. It’s important to keep an eye on these levels as key support/resistance and play the market accordingly.
Long-term however, as the May 2020 halving draws near, miners are expected to hold on to their block rewards, further diminishing supply and organically driving prices higher.
Altcoins had an unspectacular month, with leading altcoins Ethereum and Ripple losing further ground on Bitcoin and languishing at levels not seen in over two years with no signs of a recovery. There’s growing sentiment that altcoins may fall by the way side as Bitcoin continues to garner glowingly positive mainstream attention.